Council to Attempt Rescue of Park District Deal

Tuesday, September 19, 2017, 8:17 am
By: 
Alice Dreger

Above: MEDC CEO and Michigan Strategic Fund President Jeff Mason (top), Mayor Mark Meadows, and the blight.

East Lansing’s City Council will go forward tonight with yet more paperwork on the Park District redevelopment plan at a special meeting, Mayor Mark Meadows tells ELi. This will happen in the hopes the DRW/Convexity proposal for the blighted corner of downtown East Lansing may yet be rescued.

“We will be going forward at this point with the action we contemplated for Tuesday night,” Meadows told ELi yesterday, in response to questions.

What’s going on?

ELi broke the story on Saturday that legal action by Scott Chappelle—a developer with a troubled history who lost the “Park District” properties to foreclosure years ago—is effectively killing attempts by the current owner and developer, DRW/Convexity, to go ahead with the plans as approved by the government of East Lansing.

Even though a court determined that Chappelle lost the properties to foreclosure, Chappelle has been claiming, through his attorney Arthur Siegal of the Jaffe law firm, that DRW/Convexity can’t obtain a $10 million Michigan Business Tax credit for the Park District project without his consent. That credit is handled through the Michigan Economic Development Corporation (MEDC).

Chappelle has also been claiming through Siegal that he is owed over $6 million in reimbursements from the Brownfield Tax Increment Financing (TIF) plan for the redevelopment project.

DRW/Convexity and various members of East Lansing government and staff, including Meadows, have indicated they don’t believe Chappelle has any rights to future tax incentives for properties he lost through foreclosure. Meadows says plainly, “He has no approved site plan and he has no property.” (Meadows is an attorney who served in the Michigan Attorney General’s office for over two decades.)

Siegal and the MEDC have declined to answer questions about why they might think that Chappelle has any legitimate legal claim here. Siegal has also not answered questions about how Chappelle thinks he spent over $6 million on Brownfield-eligible costs when he failed to do environmental clean-up or demolition of the buildings blighted under his company’s ownership.

But it doesn’t really matter whether Chappelle has such rights at this moment. What matters is that he’s threatening to sue. And that’s causing the MEDC to repeatedly come back to the City of East Lansing asking for more amended paperwork before it will send the question of the $10 million credit and Brownfield TIF plan to the Michigan Strategic Fund for a decision.

Meadows has told ELi that, were he still Assistant Attorney General and advising the MEDC, “I would tell them to go ahead and award the money to Convexity and if Chappelle wants to sue, let him.”

But so far, MEDC has been unwilling to put the project on the Michigan Strategic Fund Board’s agenda for a decision, hoping somehow the matter will be resolved without having to face a possible lawsuit from Chappelle. DRW/Convexity says the project can’t work without the $10 million tax credit approval from the Michigan Strategic Fund.

How can this be resolved and move forward?

Late yesterday, I put to Meadows that it appears that there are only four ways this project can move forward:

  1. MEDC, under advice from the Attorney General, decides they don’t care if Chappelle is going to sue them. They put the project on the Michigan Strategic Fund board and the tax incentives are approved.
  2. DRW is willing to pay Chappelle off to go away and leave their project alone. In that case, the Michigan Strategic Fund board would put it on their agenda.
  3. Chappelle is willing to walk away without being paid off.
  4. DRW finds a way to do the project without the $10 million credit they have said they need.

Meadows responded to my formulation, “I don’t think you missed any of the potential things that could happen. I think you are wrong in thinking the possibilities are not still in play.”

But can this work? It seems unlikely Chappelle will walk away, unlikely DRW/Convexity can do the project without the $10 million, and unlikely DRW/Convexity will pay Chappelle off as that has not yet happened.

That leaves only possibility #1, and even if the MEDC were to decide to ignore Chappelle’s threats and go forward, and the Michigan Strategic Fund granted DRW/Convexity the incentives it is seeking, Chappelle suing—or even threatening to sue—could still effectively stop the project.

That’s because his legal threats can get in the way of DRW/Convexity obtaining needed financing from banks for the project. (Banks don’t like to lend to projects mired in lawsuits.) You don’t have to have a good case to file a lawsuit.

Will the buildings still be demolished in early October?

We reported on Saturday that DRW/Convexity’s attorney David Pierson said the remaining blighted buildings will come down in early October. DRW/Convexity has been leaving the buildings up because the $10 million credit depends on the blighted buildings still existing when the Michigan Strategic Fund makes its decision on the project. With the Strategic Fund effectively deciding not to decide, Pierson has suggested, the buildings might as well be demolished.

But now, Meadows is suggesting Council will be pushing the MEDC and Michigan Strategic Fund to make a real decision, and the buildings have to be standing when that happens. The Michigan Strategic Fund meets only once per month. If the decision is made at the September 26 meeting, then the buildings could be demolished in early October.

If a decision won’t be made until the October 24 meeting, however, then the buildings will presumably be kept up through at least late October. They might be maintained even longer if the decision is put off even longer.

Will this saga never end?

Even if somehow DRW/Convexity can get the $10 million credit approved, obtaining the actual money depends on the main building of the project, along Grand River Avenue, being completed by May 2021. So, the window for getting the credit is closing.

If the decision on that tax credit gets dragged out much longer, the project will fail because of time running out.

Meadows has suggested that the City of East Lansing might now sue Chappelle to stop him from messing with East Lansing’s ability to move forward. But so far, that hasn’t happened, and even if it did happen, it might slow everything enough to effectively kill the project.

In the event the project as approved can’t happen, DRW/Convexity will either sell the properties or propose a new project. Some people who don’t like what has been approved or who don’t like the idea of public subsidies for private redevelopment have said this would be best. But most people weighing in within East Lansing seem to want the DRW/Convexity proposal as approved to happen.

Tonight's special meeting of Council begins at 6 p.m. in the courtroom at City Hall. It will be followed by a discussion-only meeting of Council at 7:30 p.m.